Taking on Tesla- on your own turf

Challenge direct sales with EVs from familiar makes and service Tesla can’t match.

If you’re anything like me, you might be experiencing long term bad-news fatigue by now, after months of Carvana this and coronavirus-disrupted-supply-chain that. Shrinking margins on vehicles that require consumers to finance for questionably long terms concern anyone with a stake in the continued sustainability of the automotive industry.

Challenges that in one way or another impact your friendly neighborhood dealership – or will soon enough – seem to be in abundant supply lately. If the recent news of Tesla winning an appeals case to circumvent the franchised-dealer model and sell directly to consumers in Michigan feels like insult added to injury, well…you’re not alone. Steps toward similar direct sales in Colorado are cause for legitimate concern for dealers. Uncertainty doesn’t help any of us sleep easier, and headlines like “EV bill stirs direct-sales fear for dealers” might contribute to keeping dealers up nights.

How worried about Tesla and direct sales of EVs should you be though? Maybe not quite as much as some of us might think.

Evolutionary, not revolutionary.

In a recent issue brief Gabriel Collins, an expert in Energy Studies at Rice University’s Baker Institute, notes that without production on a much larger scale, Tesla cannot compete with legacy brands. Collins writes that “Tesla has been ‘evolutionary’ in that the changes they have introduced to the car market are thus far incremental. A ‘revolutionary change, such as the introduction of the Model T, would cause palpable shifts on even a short-term basis. EVs are not yet impacting the market with sufficient mass to trigger change necessary for a revolution.” Scale would be required to create the demand for infrastructure to support battery electric vehicles en masse as well as make them affordable enough for widespread acceptance.

While charging infrastructure and affordability remain two of the issues frequently cited as reasons consumers take a wait-and-see approach to EV purchases, neither is likely to remain an obstacle indefinitely. Tesla has perhaps brought attention to EVs more than anyone else, but they are increasingly far from the only game in town when it comes to the EV market. While the transition from internal combustion engines to EVs may be both incremental and more than likely inevitable, the market appears set to crowd soon.

A ‘revolutionary change, such as the introduction of the Model T, would cause palpable shifts on even a short-term basis. EVs are not yet impacting the market with sufficient mass to trigger change necessary for a revolution.

Gabriel Collins

Energy Studies, Rice University's Baker Institute

New paradigm, familiar nameplates

While it may take some time for that transition to happen, the pace of change is picking up. EVs are no longer solely the wares of outlying “disruptors”, nor limited to small niche items in the rosters of major makes, as even a cursory glance at automotive headlines over the last few months makes clear. GM has a new Cadillac midsize crossover EV slated for production. The Hummer name – once the gas-guzzling butt of jokes about excess and environmental irresponsibility – is being revived in a new, perhaps surprisingly electrified GMC truck. Boasting a thousand horsepower and 11,500 pound-feet of torque, the new model teased in Super Bowl ads looks capable of satisfying traditional Hummer enthusiasts, environmentally guilt-free. While GM and Rivian’s murmurs of a possible collaboration fizzled out last year, it appears an electrified Chevy truck is still in the works at GM’s newly EV-dedicated Hamtramck factory.

Speaking of collaborations with Detroit heavyweights, a Lincoln-badged EV is in development with Rivian following a $500 million investment from Ford last year. Ford had been inching toward electrification for some time, but the Blue Oval’s efforts seem to be more earnest lately. By this time next year, the Mustang Mach-E, an EV crossover Ford seems confident will make you sexier, should be giving the Model 3 a run for its money, with the benefit of a century or so of dealership history and 56 years of Pony car pedigree behind it. Ford is investing $11.5 billion in electrification through 2022, including a network of public charging stations, home charging station installations and portable chargers intended to bridge the infrastructure gap for consumers who might consider an EV, but are concerned about charging access.

Ford and GM aren’t the only ones upping the ante when it comes to investment in an electrified future. Volkswagen, Volvo, BMW and others have either begun populating product lineups with EVs or have announced plans to transition to EVS in the middle future. While it’s been incremental so far, it’s only a matter of time before the shift to EVs ceases inching forward and begins growing by exponential leaps and bounds as larger, established OEMs invest in vehicles and infrastructure.

Play to the home field advantage

All things considered Tesla has made some impressive strides toward mainstreaming electric vehicles. And while we’re biased against the direct sale business model, of course, credit must be given to their attempt to provide the customer experience they perceived was missing in the traditional dealership model.

As EVs and OEM support for them become more widespread, dealerships have a distinct advantage to press against Tesla, or any others attempting to circumvent the traditional dealership distribution model with direct sales: over a century of history.

Dealerships have been linchpins in our communities for decades. As technology advances, a unique opportunity arises to use technology to help change perceptions from negative stereotypes of the past and move the automotive customer experience forward.

Keep your customers front-and-center in all you do. Continue the longstanding dealership tradition of community involvement and good citizenship. Provide the kind of service that keeps your customers coming back over not just years, but generations. Adapt to the changing times and technology but do what you do best as a dealer.

Let Us Know What You Think

About Modern Dealership

Modern Dealership informs and supports today’s automotive professionals, providing them with a strategic business advantage in a quickly evolving industry. Written by dealers and other leading auto experts, each quarterly issue focuses on a theme relevant to the challenges faced by dealerships today. Article categories in every issue include Modern Sales, Modern Fixed Ops, Modern Operations, Modern Communication, and MD Insights.

About Modern Dealership

Modern Dealership informs and supports today’s automotive professionals, providing them with a strategic business advantage in a quickly evolving industry. Written by dealers and other leading auto experts, each quarterly issue focuses on a theme relevant to the challenges faced by dealerships today. Article categories in every issue include Modern Sales, Modern Fixed Ops, Modern Operations, Modern Communication, and MD Insights.